Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded and imposed a fine of RM100,000 on Fintan Romuald Inbaraj Nicholas (FINTAN) for trading misconduct which involved execution of trades that caused significant price fluctuation in eight (8) counters, namely STAR, JCY, BKAWAN, COASTAL, CBIP, HSPLANT, TDM and BJTOTO (8 Affected Counters) and impacted these securities’ closing price to hit at or near the limit up/down price on 21 June 2013. FINTAN is also required to undergo training on the conduct or professionalism of Dealer’s Representatives (DRs)/market offences.
FINTAN, who was at the material time of the breach a Salaried Dealer’s Representative (SDR) (cum Head of Inter-Broke Dealing team) of Kenanga Investment Bank Bhd (KIBB) at its Principal Office, had contravened and/or triggered the provisions of Rules 3.14(e)&(g) and/or 5.01(b) of the Rules of Bursa Malaysia Securities.
Bursa Malaysia Securities places a strong emphasis on the need to maintain a fair and orderly market and will not tolerate any acts or practices which may result in or has the effect of the market not being orderly and fair. Bursa Malaysia Securities will not hesitate to take appropriate actions including imposing a fine or any other actions which commensurate with the severity of the breach against anyone who engages in such misconduct.
BACKGROUND
The finding of the breach and the imposition of the sanctions on FINTAN was made pursuant to Rule 15.02 of the Rules of Bursa Malaysia Securities upon completion of due process and after taking into consideration all facts and circumstances, including that:
- Based on FINTAN’s instruction, the execution dealers of KIBB’s Inter-Broke Dealing team under the charge of FINTAN had entered buy/sell orders of the 8 Affected Counters for a client as part of the client’s portfolio rebalancing (in a market on close order) at prices which were significantly far away from the market price and at/near limit up or down prices for the 8 Affected Counters on 21 June 2013.
- The entries of these orders on 21 June 2013 had:
- adversely affected or impacted the Theoretical Closing Price (TCP) of the 8 Affected Counters during the Pre-Closing phase and/or the Trading At Last phase giving rise to the significant increase in the closing price of two (2) counters (of buy orders) which hit at or near limit up price and significant decrease in the closing price of six (6) counters (of sell orders) which hit at or near limit down price; and
- distorted the discovery of the fair price of the 8 Affected Counters.
- In undertaking any trading strategy and executing/instructing the execution of these orders towards fulfilling client’s orders, FINTAN should have undertaken the following:-
- considered the effects, risks and consequences of entering orders at prices which were significantly far from the market price of the 8 Affected Counters;
- assessed the liquidity for each of the counters taking into account, amongst others, the magnitude of the client’s orders vis-a-vis the opposing orders in the market in respect of these counters at the material time prior to/of execution of the orders; and
- closely monitored/ensured close monitoring of the orders entered;
to prevent any possible disruption to market orderliness/adverse price impact to the relevant counters in compliance with the Rules.
FINTAN however had failed to undertake such assessment and monitoring and had unreasonably executed/instructed the execution of these orders based on, amongst others, an assumption that there was generally liquidity of counters on a rebalancing day.
- As a DR, FINTAN must at all times:-
- exercise proper skill, care and diligence;
- carry out his duties in a manner that contributes to the maintenance of an orderly and fair stock market; and/or
- not do or refrain from doing anything which may result in or has the effect of the market not being orderly and fair.
ADDENDUM
Rules 3.14(e)&(g) and 5.01(b) of the Rules of Bursa Malaysia Securities (the Rules) state, amongst others, that:
- throughout the term of a Registered Person’s (RP) registration, a RP must exercise proper skill, care and diligence; and carry out the RP’s duties in a manner that contributes to the maintenance of an orderly and fair stock market; and
- a RP must, in the conduct of the Participating Organisation’s business, not through any act or omission, do anything which may result in or has the effect of the market not being orderly and fair.
Trading Phases:
Continuous trading phases (i.e. from 9.00 a.m. to 12.30 p.m. for the morning session and from 2.30 p.m. to 4.45 p.m. for the afternoon session)
Pre-Closing phase (from 4.45 p.m. to 4.50 p.m.) – During this period, orders can be entered, modified and cancelled, but no matching will take place. The Theoretical Closing Price is calculated on a real-time basis during Pre-Closing and is calculated each time a new order is entered into the order book.
Trading at Last (TAL) (from 4.50 p.m. to 5.00 p.m.) – During this period, orders can be entered, modified and cancelled. Orders at TAL will only be entered and matched at the last done price/closing price.
For more stock market terminology, please refer to the Glossary of Stock Market Terminology available at Bursa Malaysia’s website at http://www.bursamalaysia.com/market/ securities/education/market-terminology/glossary-of-stock-market-terminology/